Debunking America’s Populist Narrative

Stagnating household income in the US is not the result of globalization, free trade, or immigration. The responsibility lies with US politicians peddling ideology instead of pragmatic macroeconomic management – and thus ultimately with the citizens who support and elect them, as well as those who don't bother to vote at all.

BERKELEY – One does not need to be particularly good at hearing to decipher the dog whistles being used during this year’s election campaign in the United States. Listen even briefly, and you will understand that Mexicans and Chinese are working with Wall Street to forge lousy trade deals that rob American workers of their rightful jobs, and that Muslims want to blow everyone up.

All of this fear mongering is scarier than the usual election-year fare. It is frightening to people in foreign countries, who can conclude only that voters in the world’s only superpower have become dangerously unbalanced. And it is frightening to Americans, who until recently believed – or perhaps hoped – that they were living in a republic based on the traditions established by George Washington, Abraham Lincoln, and Teddy and Franklin Roosevelt.

But what is even more unsettling is the political reality this rhetoric reflects. There can be no comparing Democratic presidential candidate Bernie Sanders’s policy-oriented critique of neoliberalism to the incoherent bluster of Donald Trump or Ted Cruz on the Republican side. And yet, on both the right and the left, a common narrative is emerging – one that seeks to explain why the incomes of working- and middle-class Americans have stagnated over the past generation.

J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

The Republican Party’s likely presidential candidate is a racist, misogynistic xenophobe. Many Americans and others – not to mention Republican leaders – may be horrified, but Donald Trump has merely brought to the US a political style developed in Europe and perfected in Russia.

"The problem lies...with the citizens who elect..."? Surely you can't believe that the modern voter is anything but the low-information moron that government schools educate him/her to be, as further developed by the massive misinformation dumped on him/her by both parties' campaigns?

It would also have been useful if you had taken the time to mention the recent message of a well-known senator that "globalization is here to stay", get over it and eat your snowshoes, those of us in the elite political class have neither the time nor patience to craft legislation nor even wish to stand and listen to the caterwauling of those whose economic fate we have already chosen to condemn. You can't even begin to measure that level of arrogance with a truck scale, yet he wishes to condemn us for whining in the first place! Yes I WOULD like to know how he even got elected but now I guess it's just water over the falls...but if I were you I wouldn't condemn the "non-economist" class here either, we have feelings too!

I love you Brad I really do and I think you are genuinely well intentioned, but I also think you are significantly off target on a number of points here.

First, yes, you are correct that so-called “free trade” does, depending on its structuring, benefit our partners in a way that may have tangential benefits to us like security. However, that is not in the slightest how these deals were sold to the American people. These deals were supposed to be immediately mutually beneficial and they were not sold with the inference that we would see Detroit and the rest of its middle class jobs hollowed out and sent to places like China.

Are you saying that this was the design from the beginning – that industrial jobs, curiously mostly unionized, would find their way elsewhere? Are you saying our leadership knowingly passed a treaty that would destroy the middle class as it was known at the time? Are you saying the millions of Americans that lost jobs as a result, even if some have since found employment in the vaunted “technology drivers”, were willingly signing up for such a traumatic transition?

I am no millennial – I was well aware of what NAFTA was being sold as and no American, no matter how generous we were, was agreeing to give up their jobs to better less affluent nations. The notion itself is perverse – who with any sanity would buy that? Maybe more importantly, who with any sanity would sell that?

Secondly, yes, it has improved the living standard of say China, but Central America and South America are a mess. Mexico despite syphoning enormous numbers of auto jobs has not improved its standard of living to any significance. This is in part because while one industry has improved, its corn industry has been devastated by cheap subsidized American imports (subsidized of course hardly being in the spirit of “free” trade). Moreover Mexican workers, as with other partners, do not have the protections that American workers have, nor the same environmental protections. Many have limitations on collective bargaining as well as other workers’ rights (can you have “free trade” with countries that are not free?). This means we are effectively exporting poverty and pollution. That our workers cannot compete is no surprise given they do not play on the same playing field.

To that end, why did our progressive forerunners fight so hard for gains like worker protections and environmental protections when we are willing to trade them away so easily by migrating them somewhere else? Why did workers literally give their lives to fight for these protections for Americans only to say they don’t matter in another country? Do these rights only matter for privileged Americans? Sure, someday maybe they will come up to our standards, but until then (if ever), our workers suffer unfair competition.

Third, what is your definition of “industries that require[d] low wages”? Were auto workers such an industry? Steel workers? TV makers? Furniture makers? Clothes pin makers? All of these jobs once provided Americans steady jobs that on a single salary allowed people to not only have a roof over their head, but feed themselves, pay for medical care, have vacations, and even retire with guaranteed pensions. Were these “low wages”? Because if they were low wages, there are a tens of millions of millennials who would sign up for them in a heartbeat.
Fourth, who are you or anyone else to play god choose what industries require “low wages” (losers) and those that don’t (winners)? And make no doubt about it, winners and losers are being chosen – the outcomes are not inevitable. These trade deals are structured to favor some over others. What you call “low wage” face international competition, while other jobs as Dean Baker has noted, like say those of academics, doctors, and others in the “credentialed class”, see no such competition. Is this because they are, using your word, more “important”? This seems an extreme value judgement, at one time people thought making ball bearings or rolling steel was important. I don’t see why that isn’t true today.

When one profiles the classes that are most influential in governance, coincidentally those that make the most money, their jobs aren’t the kinds of jobs that are subject or open to free trade. Curious how that is. One has to wonder if such supportive articles would be written if the competition was in the professions of those writing in support of “free” trade.

Fifth, how is it that we know that “technology drivers” are (more) “important”? Because iPhones make people happier? Because cool tech makes the world better? Because Star Trek?

Sure, medical advances help the world, if you can afford them that is, but do you really feel that the “technology drivers” have made life for the average American better than it was in the 1950s? Yeah, technology may give a leg up on competition, but as I see it only so that you can spin the rat wheel of competition ever faster. We make better technology so we can outpace other countries so later they can try to outpace us, rinse and repeat, rinse and repeat. Does it ever end? Is this a future to be encouraging?

More importantly, will technology get us what matters most, like comfort or more time with friends and family? I doubt it. Maybe I’ll check my iPhone on it.

Ok, I love my toys as much as the next one, but I’d give up every last one if it were to ensure living wages, health care, and a guarantee of a decent retirement for all Americans, not just the ones who are “technology drivers”. Sure, I can Google faster than ever what I need to redo the bathroom, but is that worth sacrificing millions of what were once great jobs for?

Finally, what is your plan here? We have traded some massive ratio of manufacturing for far fewer technology and professional jobs. You’re a smart guy, sincerely, how many people can be a professor at Berkley? What percentage of Americans are capable of creating a “startup” like Google? What percentage are even capable of working at a startup like Google?

Let’s not pretend – there are great masses of people who have no hope of entering the “creative” or “credentialed” class, of being entrepreneurial John Galts, and no amount of education is going to change that. That is not because they are stupid, worthless, or have less value – they just they aren’t wired for the same things. They were however wired for the jobs people like you decided had less value, jobs that you call “low wage”, but weren’t “low wage” ironically until you made them low wage by foisting unregulated international competition on them.

So now what are we going to do with these people? Are we to consign them to a lifetime of service jobs saying “Would you like fries with that?” Do we just give up on them because they aren’t meritorious enough to have what it takes to program, become lawyers, or found a startup?

In the words of Billy Bragg, “Just because you’re better than me, doesn’t mean I’m lazy.”

I sincerely don’t get it – if technology is the U.S.’s future, and the “low wage” manufacturing is somewhere else, how are we going to employee all of these people in jobs that even have some semblance of the future they once had?

Even if you are right in your position here, you say the problem is ultimately a failure of policy, but I say it’s a failure of vision on those who made these trade policies. They (you?) knew what was going to happen and they knew we needed policy to make up for the damage, but they put through these trade deals without ensuring the legislation was there to mitigate the damage.

So, what are you and the other supporters/architects of these deals going to do about it? I ask because it seems the milquetoast candidate you are endorsing with your dog whistle “peddling ideology over practicality” comments is only offering “incremental” care for the great hemorrhage that once was our working class.

I strongly agree with all of your points in this essay, however, the conclusion that you draw from your argument I cannot agree with.

What has happened beginning with NAFTA, is that higher-paying North American jobs (like auto manufacturing) were sent en masse to Mexico and to other countries -- leaving a smaller share of higher-paying jobs in the overall economy.

Which is fine if all of those higher-paying jobs were held by people near retirement age. But they weren't.

The vast majority of those (millions of jobs, since 1974) were higher-paying jobs held by young workers with growing families who are exactly the people the economy needs in order to maintain the best possible velocity of money.

Over their lifetimes, workers with higher-paying jobs contribute the most to the overall economy, and cost the economy the least.

Tracking each quintile by their CO2 emissions is one good marker here. The 2nd and 3rd quintile contributes the most to the economy with the (relative) lowest amount of CO2 emissions.

NAFTA and other trade agreements have therefore, put downward pressure on wages (de facto) and taken the very best economic contributors out of the equation.

With a zero unemployment rate, it wouldn't have mattered much. Other similar jobs would've been available -- even if slightly lower-paying.

But that wasn't the case.

Because the higher-paying jobs were disappearing, each one percent increase in the unemployment rate, worsened the economy by orders of magnitude.

I'm surprised this hasn't been studied fully.

It's interesting that the country with the highest per-capita income, also has among the highest productivity, among the lowest crime rate, among the highest education level, and citizens there typically rank their country (Norway) the highest in the UN Happiness Index and the Social Progress Index.

Markets don't lie. And we can't argue with success.

It's time we admit that Norway has the better economic model; We here in North America are wearing the Emperor's clothing when we think that we have the better economic model.

US politicians receive support from private and public monopolies in exchange for granting regulations that deny other people the freedom to compete in their industries, including energy, banking, manufacturing, housing, retail, health care, transportation, utilities, telecommunications and agriculture. The lack of competition leads to higher costs, and reduced quality, innovation, wages and economic growth. Political attempts to delay crises through government spending and manipulating interest rates just makes it worse. The solution is to abolish corrupt regulations that favor monopolies, including the Fed banking monopoly, the Fannie and Freddie duopoly, crop subsidies, laws limiting the supply of doctors and hospitals, energy mandates and subsidies, etc., etc.

Sam used to work in a factory that made "things" but he shopped at Walmart because things made in China were cheaper. His factory closed and he lost his job. Now he works at Walmart. Thanks to trade agreements, Walmart was able to turn a consumer into a worker - albeit at half his previous wage.

I fully agree that there is a political problem enhanced by disinformation fed to the voting public. However to say the root of the problem is not due to globalisation is splitting hairs. It is globalisation that has created the situation that the ballot box has difficulty in responding to.

Two real life scenarios:
#1 Joe worked for a mortgage company supporting underwriters and their apps. Deregulation happened. All the underwriters left. Noobs were hired that would rubber stamp practically any loan. Joe left and joined a medical device co.

#2 NAFTA/free trade happens. Joe's company creates project "Super Agile" to move almost all manufacturing to Mexico and overseas, over next 5 years. US workforce reduced by almost 2/3's. Doesn't pass cost reduction on to consumers. Profits soar.

It's all about the quick buck and who benefits from it the most, people. GE set the model, everyone else got in line.

Most of this article is directed well, except the concluding line: "The responsibility lies instead with politicians peddling ideology over practicality – and thus with the citizens who elect them, as well as those who don’t bother to vote at all."

Professor Delong makes a similar error of thinking as those who blame the poor for their own poverty. A quick reading of Professors Gilens and Page of Princeton and Northwestern universities illustrates and proves the exact opposite.

Most of those who don't vote have come to the completely logical conclusion that voting has no relation to policies implemented by oligarchs in a fake democracy like the US. Though Bernie seems an exception to the rule.

The work of Gilens and Page is archived here for anyone interested in understanding the reason why most people don't vote

Lets just admit that the entire political elite has long sold out to financial interests in every way. They climb to the top to gain power and wealth and even when they start off with personal ideals, when they reach the top they are quickly absorbed and incorporated into the existing power structure. Fact is, they don't have a chance to change anything substantial as the script has already been written for them. This will ensure the continuing accumulation of wealth at the top while producing a bearable existence for the middle classes here, as well as in China. Globalization is essential to this and will be pursued until it has been achieved. Trump will follow this agenda as well as Cruz and Clinton and while Sanders may seem to aspire to a kind of post-capitalism, if he were to get the job they would quickly set him straight just the same. We can be aware of it, but not change it as it is not in our hands. Democracy? Forget it. We've never really achieved that.

Re: "There are good reasons why the US adopted policies that encouraged poorer countries to grow rapidly through export-led industrialization."

There is also a good reason not to encourage such a policy, namely, export-led industrialization is unsustainable in the long run. It is no accident that the current economic crisis began at home while we were running a substantial current account deficit in the face of a speculative bubble in our domestic economy, and that this crisis has hit the hardest in those countries that were in a similar situation. See: http://www.rweconomics.com/htm/WDCh3e.htm

Like it or not cosmopolitan globalization (“free trade” and Open Borders) has ravaged the lives of millions of Americans, both in theory and in practice. Trade theory (Stolper–Samuelson, Heckscher–Ohlin) suggests that “free trade” with low wage nations will undermine wages in the U.S. Of course, that is exactly what has happened. The actual results have been markedly worse than any theory predicted. David H. Autor, David Dorn, and Gordon H. Hanson found that trade with China has cost the U.S. millions of jobs.

“China’s emergence as a great economic power has induced an epochal shift in patterns of world trade. Simultaneously, it has challenged much of the received empirical wisdom about how labor markets adjust to trade shocks. Alongside the heralded consumer benefits of expanded trade are substantial adjustment costs and distributional consequences. These impacts are most visible in the local labor markets in which the industries exposed to foreign competition are concentrated. Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences. Exposed workers experience greater job churning and reduced lifetime income. At the national level, employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize. Better understanding when and where trade is costly, and how and why it may be beneficial, are key items on the research agenda for trade and labor economists.”

Of course, immigration (DeLong is fanatically committed to Open Borders) has made all of these problems worse. Econ 101 says that importing cheap labor on a massive scale will devastate native workers. Of course, the truth is worse. Wage have predictably fallen (massively in many cases). However, native employment has declined. Andrew Sum, Paul Harrington, and Ishwar Khatiwada did a completely standard study of this. Quote

“Over the 2000-2005 period, immigration levels remained very high and roughly half of new immigrant workers were illegal. This report finds that the arrival of new immigrants (legal and illegal) in a state results in a decline in employment among young native-born workers in that state. Our findings indicate that young native-born workers are being displaced in the labor market by the arrival of new immigrants.”

Hanson and Grogger reached similar conclusions. The abstract reads

“The employment rate of black men, and particularly of low-skill black men, fell precipitously from 1960 to 2000. At the same time, the incarceration rate of black men rose markedly. This paper examines the relation between immigration and these trends in black employment and incarceration. Using data drawn from the 1960-2000 U.S. Censuses, we find a strong correlation between immigration, black wages, black employment rates, and black incarceration rates. As immigrants disproportionately increased the supply of workers in a particular skill group, the wage of black workers in that group fell, the employment rate declined, and the incarceration rate rose. Our analysis suggests that a 10-percent immigrant-induced increase in the supply of a particular skill group reduced the black wage by 3.6 percent, lowered the employment rate of black men by 2.4 percentage points, and increased the incarceration rate of blacks by almost a full percentage point.”

So why does DeLong support globalization policies that wreck the lives of tens of millions of Americans and make America a poorer, weaker, nation? He answer the question with his unabashed “cosmopolitanism”. Typical (absurd) quote from DeLong.

““The U.S. is still a ne plus ultra superpower of a relative magnitude exceeded only perhaps in the mid-nineteenth century when Britain was the only industrial nation and the sun never set on the British Empire. A hegemon of such a magnitude has a strong moral obligation to the world as a whole–and to its own long-run comfort and, indeed, survival once it ceases to be a hyperpower–to be cosmopolitan, and to look at the broad effects of its policies on the world outside its borders.””

Aside from the factual errors (China’s now has the largest economy in the world), the notion that the U.S. should sacrifice its own economy to ensure its future “survival” is crazy. America’s security has always depended on the talents of two great Admirals (Admiral Atlantic and Admiral Pacific). Add to that, the enduring charms of nuclear fusion and the basis for future American security is well defined. Destroying our own economy, to make foreigners richer, won’t garner the U.S. any admiration, respect, or appreciation 50 years from now. Contempt is a far more likely outcome and contempt is dangerous.

So why does Delong still defend the indefensible? Some obvious reasons include shame, guilt, and remorse. DeLong was one of the principal architects of NAFTA (and still tries to defend NAFTA). Anyone who advocated NAFTA has much to answer for. Rather than admitting guilt, DeLong tries buster and BS instead.

Of course, the real truth is probably much worse. Globalization is bad for America but the “cosmopolitan” thing to do. Like any good cosmopolitan anti-American, globalization is good precisely because it hurts America. He even boasts about it. Typical quote Alex Tabarrok is a rootless cosmopolitan. I am proud of him, and proud to know him.”

Of course, DeLong wants to blame it all on the Republicans. The truth is that DeLong is a card-carrying member of the “Diversity Über Alles” faction of the Democratic party who don’t care about what happens to ordinary Americans as long as the “diversity” and “tolerance” agendas move steadily forwards.

Of course, DeLong gets his history entirely wrong. Abraham Lincoln was an ardent protectionist. Typical quote attributed to Lincoln.

“I don't know much about the tariff, but I know this. If I buy a coat in England, I get the coat and England gets the money. If I buy a coat in America, I get the coat and America gets the money.”

Teddy Roosevelt supported protective tariffs and was an ardent immigration restrictionist. As President, he appointed the Dillingham to investigate immigration and (based on the commission’s findings) advocate laws for restricting immigration. The following quote should make it clear that TR was the Trump of his time.

"In the first place, we should insist that if the immigrant who comes here in good faith becomes an American and assimilates himself to us, he shall be treated on an exact equality with everyone else, for it is an outrage to discriminate against any such man because of creed, or birthplace, or origin. But this is predicated upon the person's becoming in every facet an American, and nothing but an American ... There can be no divided allegiance here. Any man who says he is an American, but something else also, isn't an American at all. We have room for but one flag, the American flag ... We have room for but one language here, and that is the English language ... and we have room for but one sole loyalty and that is a loyalty to the American people."

George Washington was a slave owner (although it appears that he privately opposed slavery). His farewell address to the nation was a specific call for isolationism. Quote

“The great rule of conduct for us, in regard to foreign nations, is in extending our commercial relations, to have with them as little political connection as possible.”

Note that the naturalization acts passed while Washington was president specifically limited citizenship to “free white” persons.

Franklin Roosevelt fiercely disliked Jews and publically supported restrictions on Jewish enrollment at Harvard. As President he urged the Navy to use blacks draftees in bands (“they all have rhythm”). Of course, he also interned the Japanese. FDR expressed his general attitude towards immigration as follows.

“"Californians have properly objected on the sound basic grounds that Japanese immigrants are not capable of assimilation into the American population... Anyone who has traveled in the Far East knows that the mingling of Asiatic blood with European and American blood produces, in nine cases out of ten, the most unfortunate results"”

No one should be surprised by DeLong’s miserable errors on this subject or any other. At UC Berkeley he is well known as the “worst professor on campus”. Typical quotes

“This guy is a legend at Cal...because everyone knows he's the worst prof on campus.”
“This is probably one of the worst class i took at Cal. Extremely boring, not helpful at all.”
“Stay away! DeLong is the worst professor I have had at Cal, and ruined a class I was otherwise very excited to take. He is incredibly disorganized (or just doesn't care) and yet - at the same time! - incredibly arrogant.”
“The worst of the worsts. I want to learn economics, not the history of economics. He is full of himself.”
“Professor DeLong is the worst lecturer I have ever had.”
“Stay away from this guy...Worst professor I've had at Cal so far. Extremely boring and pretentious pretty much sums him up.”

J. Bradford DeLong is not at all amused at some of the presidential candidates' "populist narrative," which swirls around in "dog-whistles." He says, "it is frightening to people" both at home and abroad, because the rhetoric - "as a basis for policymaking" - would benefit no one, giving the international community the impression that "voters in the world’s only superpower have become dangerously unbalanced." What's "unsettling" is that many Americans suddenly find themselves panicking, facing the "political reality this rhetoric reflects."
However little Bernie Sanders and Donald Trump have in common, "on both the right and the left, a common narrative is emerging – one that seeks to explain why the incomes of working- and middle-class Americans have stagnated over the past generation." What's worse is that the GOP, despite its opposition to Trump's nomination, doesn't realise that the chickens have come home to roost.
Indeed, "for decades, senior Republican politicians and intellectuals have been uninterested in educating the American people about the realities of economic policy." They are insensitive towards feelings of the working-class people in Gary, Detroit or other cities in America that see a steep decline. Either these people complain about high unemployment or they believe that the middle- and working-class wages "have stagnated because Wall Street pressed companies to outsource the valuable jobs that made up America’s manufacturing base, first to low-wage Mexicans and then to the Chinese." They blame free trade agreements for their grievances and overlook the reason for stagnating incomes - "American politicians have failed to implement policies to manage globalization’s effects." While low-wage jobs disappeared, high-end technology jobs have also been created, leaving many unfilled, due to the lack of qualified staff.
Sanders echoes the same anti-establishment views, dragging Hillary Clinton to the left. In an effort to "fend off" his attacks, she has not been able to take a firm position on the Keystone XL pipeline, the minimum wage and the Trans Pacific Partnership, or TPP. As a matter of fact she could have pointed out the wrong narrative about "a bipartisan effort, with both parties unified behind financial deregulation and trade deals that undermined the US economy." She should explain that the US benefits also from free trade agreements. She had praised the TPP in its early stages when she was secretary of state. She didn't say she opposed TPP until October 2015.
The author says the GOP's "rigid and die-hard ideological opposition to 'taxing the rich [has] destroyed, on a practical level, the theoretical basis for believing that free trade benefits everyone.'” America's problem does not lie in "globalization, poor negotiation tactics, low-wage Mexicans workers, or the overly clever Chinese that bear responsibility," but in those who had voted for politicians with no sense of "practicality," because they are not pragmatists, but a bunch of fanatics and ideologues.

I am a Californian, long teaching business in Germany, & currently in China teaching at a technical university. Lots of issues, but in simplest terms more income must go to, say, the middle 50%, so they can both spend now & save for their retirement. At the moment, the Chinese seem to have better odds of doing so than Americans.
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DeLong asserts - "politicians peddling ideology over practicality – and thus with the citizens who elect them, as well as those who don’t bother to vote at all."
Hard to blame the voters when there is only one kind of politician out there - both parties are equally to blame.
Hard to blame the non-voters - when a vote cannot produce a solution, only more of the same.
Blaming Republicans for the mess when Clinton and Obama delivered big time for the .1% is hardly fair.

Post-GFC fiscal and monetary policy is sucking the life out of economies worldwide, enriching the top 1%-- and, within that, the top 0.1% -- to a degree not even seen in the lead-up to the Great Depression. And this is the best the economics "profession" can offer as analysis? Shocking.

The pointless liberal view: things are better on average, so we just need to distribute those benefits.
The reality: the top 10% take all the benefits and don't care about anyone else.
The liberal elites are powerless, so their support of their 18th Century economic fathers turns out to benefit the top 10%. Explaining what we should do to share the wealth is pointless drivel in dead tree form that increases their wealth and salves thier consciences.

No president has been elected without being a member of the CFR unless the vice president was a member. This is why Americans are tired of liberal professors, "Berkeley", teaching our children that it's all our fault! We don't get to see the bills passed in congress! The TPP and TPA are glaring examples of trade bills hidden from the public. Have you read these bills? You cannot deny that America is a net importer do to cheap foreign products which has dramatically increased our trade deficit. I have a graph in my phone's memory that shows just how bad the problem has become over the last few decades. And let's be honest about the H1B1 visa program, it was NEVER intended to replace American workers in our country that have been doing the IT jobs for decades. It is all out asymmetrical warfare on the middle class. I have been reading articles for 30 years about how the elite plan to eliminate the middle class in America. Conspiracy? Or prudent planning? Most people believe Global Warming is BS. However, in a recent article, the "LIBERAL" author admitted that the entire "climate change" hoax exist to transfer wealth from the developed nations to the undeveloped nations. We have NO choices anymore! This corrupt election amounts to a choice of a loud mouth or a criminal. Why don't YOU petition Washington to quit spending money like it grows on trees? After all, you are an economist! Or doesn't a soon to be $20 Trillion debt bother you? Don't YOU have some skin in the game? Or is your diatribe just another "blame the people" rant? If so, look in the mirror!

The failures of the educational system are also very evident in the quality of political debate and the actual policy performance of recent American administrations - Trump and Cruz are riding the heights of that wave.

The disappointing moment of this piece is when Delong blames it all on the Republicans. It's that phony narrative that keeps the corrupt Democratic Party establishment in power and in partnership with the Republicans. This is a two-party problem, very much including the Clintons. It's my good-ole Democratic Party Senator Chuck Schumer, for example, who is the strongest defender of the Carried Interest boondoggle, but the list of Democratic-Party supported abuses is a mile long (yes, less egregious than the Republicans, but without any excuses nonetheless).

Yes, the Republicans did not pass welfare reform, nor NAFTA, nor the sentencing laws that primarily impact minorities and the poor. They did not by themselves bail out "virtuous" Wall Street while ignoring the "non-virtuous" underwater mortgagees. The Bush tax cuts could not have been passed without Democratic participation, nor could the trillions spent in boondoggles oversees. No Republican forced Obama to set up Simpson Bowles or to talk about how the nation needed to tighten its belt at the worst possible time. No Republican forced the Clinton and Obama administrations to look away as massive monopolies grew untouched by anti-trust laws. No Republican forced Obama to slap Wall Street malfeasance on the wrist instead of prosecuting those most responsible. Certainly no Republican forced Clinton to support massive Wall Street deregulation who's impact at the very least was to create a permanent state of regulatory capture due to revolving door politics.

Most of all, no Republican forced Clinton or Obama to not lobby harder for the middle class and the poor. Maybe the Republicans would have continue to block the efforts, but they could have at least continued to hammer home the narrative ala Sanders rather than hippie bashing and hiding behind "inevitability" arguments. Instead of "liberal" and "government" being dirty words and Democrats always ceding defensive ground to Republican ideology, they could have maintained the narrative that more than just the "technology drivers" (ie: the elite) mattered.

"If it weren't for those meddlin' Republicans we would have gotten away with it" is getting pretty old now. It is becoming clear that Democratic failure here is a feature rather than a bug.

I would argue there has been an educational system failure in America. We are over 30 years into the Tech revolution yet despite a population in excess of 300 million H1-b visa applications from the Tech industry outnumber the available visas.

Implicit in new trade agreements is the expectation of disruption of labor and capital in the short run. Each market lose jobs in areas where they are less competitive, and gain where they are more competitive. It may be politically unwise to recognize the disruption but it is certainly a disservice to each country to not prepare for retraining the soon to be unemployed.

Why does the author not mention China's stubborn currency manipulation, and the massive US trade deficit with China? That deficit now stands at $365,694,500,000.

Decreasing income-and-wealth-disparity would help, but the root of the problem is our dysfunctional relationship with China. The denial of that
by politicians has only fueled Americans' anger -- and Trump's rise.

All governing is social engineering, from local parking meters and speed bumps to international trade and defense policies. Nothing is accidental. But the citizenry in the US has been propagandized to believe that while the engineering of social programs is a great evil, the engineering of economic policies should be both left to the experts and based squarely on the ideology of supply-side economics – which in itself has become a question of faith far more than reason. They have awakened to the consequences of leaving it to the experts and the predictable results of supply-side economics, an awakening that is driven by anger, outrage and ignorance. Hence, Trump and Cruz. They have been socially engineered to such an extent that they now back a billionaire populist. It’s appalling.

Excellent points from DeLong, but administrations from both parties have helped the cause of extreme inequality, which cannot be wished away by election rhetoric as data speaks volumes.
Why only blame the politicians if the majority believes that the system is working to their best interests, which includes the financial system and the big pharma, who by the way are the biggest donors in this drama?

We live/lived in a time where intellectual property is/was viewed has the main value generator.

So there was a strong incentive to outsource all activities and keep the property rights, but two problems emerge from this strategy.

First is that, intellectual property is only owned by few people and you cannot move the blue collar worker into something that generates patents or copyrights, leading to an abnormal accumulation of wealth in few people.

The second and worst problem is that intellectual property isn't a sustainable competitive advantage. Its an artificial advantage that prevents you from cloning and imitating, so the moment you outsource the production it won't take to much time for the intellectual property to be questioned by the producing countries or replaced by their own.

So much money is made from vaporware that the ones who make it have very little incentive to do it in any other way.

What will be of America once the rest of the world stops paying a premium for the rectangular phone with round edges idea, when we just start pirating all media and software?

Or in a world where the property rights go to more attractive countries, like Ubber, Apple or Google are doing?

Something that is seldom discussed, maybe because it has very strong defenders on both sides of the political spectrum, is the importance of wage stagnation on inequality.

Some how the Victorian/Ricardian view that wages cannot be above subsistence level or all hell will be lose, or its modern declination of wage stickiness and link between productivity and wages became general accepted and seldom questioned.

Growth and development is a problem of the poor and the middle class. Why would Rich people care about it, in all societies there will be always 1% that have it all, so why would you care if others don't make money, or you just stopped accumulation more money on top of the piles you have?

Yes many progressive thinkers share this idea, and its the norm to see explanation like wages cannot grow because productivity is still (Krugman being on of those), wage stickiness prevents economy to go back to equilibrium, we are at the frontier of our production capacity so secular stagnation is unavoidable, etc etc...

Now, why do we buy into this Ricardian non-sense.. What other resource we have which its price is related to productivity? (actually increasing productivity would reduce the price of the resource).

If productivity isn't growing and wages have to be lowered wouldn't it induce less capital insensitivity and reduce labor productivity even further?

If wages have to be reduced due to productivity problems, what about capital? With such large pool of capital available and lower end negative capital productivity what do we do? What about land and commodities? With so many agricultural surplus?

So we live in an era where all prices have to go down, not only wages, and probably wages are the ones who have to be reduced less...

How can we be close to potential output if there were times where we could produce for a higher demand?

With so many youth and skilled workers unemployed or sub-employed, do we actually believe in that? What about the technology explosion? Do we all drive electric cars? Have smart homes? Do we all have beach houses, or isn't it there land to build houses in the beach?

Your narrative seems to be that in a more perfect world globalization would be win-win for everyone. The reason your narrative is wrong is simple: we actually live in the real world. Making policy prescriptions for the world you wish we lived in is masturbatory.

That is the Republicans aren't going to lose their veto power over fiscal matters any time soon, and this must be taken into account, not ignored as being beneath your dignity, when contemplating any future policy.

I respect the nobility of your motives in supporting free trade, but only because you're ensconced in the ivory tower and evidently don't get out much. Politicians understand the real world, and whether Dem or Repub their motives are not yours.

I think Mr. Dabrowski is correct in the sense that the Earth consists of seven continents. That's been true for quite some time, and it will be true for some time to come. But it has not and will not always be the case. Tectonic shifts happen in human society. We did not always have capitalism, and we may not always have it. The quality of Political culture has varied over the ages, from Marcus Aurelius to Pol Pot.

When good happens, guys in ivory towers will be cited by politicians as visionaries. The prophet, who is without honor in his own country, is saved by L.P. Hartley's observation that the past is a foreign country; they do things differently there.

We need thought leaders to show us the importance of educating our electorate to pick better political leaders, and one component of that effort, if only to be called into play at some undetermined time, is the body of work left by our Cassandras.

Prof. DeLong contributes a piece of the puzzle. Yes, as Walt Kelly told us, we have met the enemy, and he is us. But we are not beyond hope, and if we are to choose the right new course some day, the dueling scapegoats offered by Trump and Sanders must not carry the day. Urgings like DeLong's may not get anything done, but they are ammo in the intellectual armory, and they will be missed if they are not around when the plates shift.

Tax rates have fallen across all income classes across the board since 1979. However, the amount of revenue collected by the federal government as a percentage of GDP has remained stable, with fluctuations that can clearly be accounted for by the business cycle. The top 1% have paid less in taxes throughout the entire post-Reagan period, including the halcyon Clinton years, but only by a few percent and in some years like 1995 the percentage (35%) was identical. Lowering tax rates lowers the after tax cost of capital, leading to more investment opportunities. The rich, instead of spending money on themselves are induced to reinvest their returns. In the 1970s, tax rates and inflation were so high that returns were negative. That is no longer the case.

" Lowering tax rates lowers the after tax cost of capital, leading to more investment opportunities. The rich, instead of spending money on themselves are induced to reinvest their returns." -- G.A. Pakela

Yes, but they're investing it overseas, not in the U.S.A., which in itself, (almost) explains the present and entire economic morass in 2016 North America/Europe.

Great insight. Thank you!
As Talking is always easy and blaming the problem or failure to others even easier.... All they want is just the VOTE, not to fix the problem. After election, nothing will be done to fix the problem anyway....

Now hang on a bit!
Blaming the voters after all that has happened over the years is muddying the water even more that it is. First they were dragged into the industrialised workforce that treated them as machines and when the job could be done cheaper elsewhere they yanked the jobs from them with no explanation. The lack of support for anyone left without work as in education to have an opportunity to chase what jobs where left, they again hung out to dry and fend for themselves. Eventually usually grabbing any work to put food on the table. The end result is plain enough to see. Link all that to the conflicting double speak of politicians and anyone else who chimes in and we end up with voter confusion and apathy that leads to being an excuse why populist politics is popping it head up all round the world. The populist vote may damage the global economics but when I survey the current scene anything looks fine for now....

Redistributive tax policy would be expected to result in a more equal division of the economic pie -- but it wouldn't be expected to make the pie larger. For example, the key to managing broad shifts in the labor market during the agrarian and industrial revolutions wasn't redistribution. Rather it was the ability to shift allocations of capital and labor in response to changes in productivity. Redistribution aside, flexible adjustment is they key to continued increases in living standards.

1. Clinton's explicit political claims that trade deals of his time would create good high paying jobs in the US.

2. bipartisan movement for deregulation of finance, leading to lack of accountability in general, and the lack, by current administration, of actions to restore accountability (in contrast to S&L crisis). Is this another false story?

3. not sure what economic theory tells us about spending a trillion a year on excellent adventures in the middle east, but if you do this for long enough, it surely has some effect. if Dems claim to be less bad on this subject, where is prosecution of Bush admin figures for their many deadly falsehoods?

4. until last 2 years or so, little acknowledgment above the "ground level" by either party that inequality and intergenerational economic mobility are bad and getting worse.

5. If globalization is a net positive, and the real cause is "failed to implement policies to manage globalization’s effects", shouldn't that be at the center of any argument about how and why focus on trade deals is inappropriate? Were supporters of the trade deals right to expect that globalization's effects would be "managed well", and was it just bad luck that they were not? Is there enough here to say that revisiting the discussion of trade deals is inappropriate?

6. If the supporters of the trade deals ALSO at the same time undermined the ability of government to "manage the effects of globalization", how does someone take those two things as a whole?

So I am supposed to bend over and grab my ankles so Mexico, China and surprisingly the companies that export jobs can get richer. You didn't mention it surprise surprise the people benefiting most from these arrangements are the politicians biggest donors. They use Ideology as an excuse to do what their owners, excuse me "Supporters" want them to do. We have a government of by and for the rich. When the average net worth in congress is well over a million dollars their self interest is rather blatant. You make disagree with me on free trade issues? I personally believe free trade treaties are eye catching toilet paper and wouldn't use them for that. But the working class has reasons for populism or hate take your choice of phrasing for the elites who basically screwed us over without even the dignity of a believable excuse while they got MUCH MUCH richer. The only thing the growing ranks of the F---ed by Free Trade/ Globalization have to say is change any change has to be an improvement.

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